July 8, 2019: Elisabeth King reports on this week’s business news

Coty's new turnaround plan to revive growth; Sales jump 24 per cent for The Hut Group; Estée Lauder edges out Colgate to rank second in US top 10 beauty and personal care companies; and global halal cosmetics market to reach US$52 billion.

Coty's new turnaround plan to revive growth

Coty's absorption of more than 40 brands from Procter & Gamble in 2016 made the multinational the third largest beauty company in the world with revenues of US$9.3 billion. The "digestion" process hasn't been easy, but Coty is the world's number one fragrance maker. It's stable also includes four out of the world's top 10 mass cosmetics brands, three out of the top 10 luxury fragrance brands and three out of the top 10 OTC hair colour brands.

Coty has announced a new four year turnaround plan spread over the 2020 to 2023 financial years and a US$3 billion writedown in brand value. The strategy has three main aims - "to steadily improve gross margin and operating margin, more in line with Coty's peer group, as well as to drive free cash flow and reduce leverage."

A new management structure will be centralised in Amsterdam. The company will focus on fewer key brands, including Boss, Burberry, Gucci, OPI and Rimmel London. There will also be more emphasis on prioritising brand country combos which currently account for 20 per cent of global sales. Coty expects to grow sales in these targeted regions to 60 per cent of its revenues by 2023 and the six blueprint countries are: the US, China, Germany, the UK, Russia and Brazil. On the product side, there will be a rationalisation of SKUs and sub-ranges to reduce product range complexity, lower inventory and drive better shelf traffic.

Sales jump 24 per cent for The Hut Group

UK-based The Hut Group (THG) has regularly hit the headlines through a spree of high-profile buyouts over the past three years. Christophe Robin, the luxury haircare brand, entered the THG stable in April to join Illamasqua, ESPA, Eyeko, Glossybox and RY.com.au, Australia's largest haircare and skincare online store.

The ambitious strategy has made THG the largest online retailer of premium beauty products in Europe. For the calendar year ended December 31st, the company's overall sales increased to AUD$1.67 billion - up 24 per cent on 2017. Gross profit also rose 31 per cent to AUD$179.09 million. Own brand revenues accounted for 59 per cent of total sales.

This has been another landmark year for THG, said Matthew Moulding, the company's CEO and founder. "Our strategic investments to develop our technology, infrastructure, brands and people have delivered exceptional global growth with 66 per cent of our sales achieved internationally."

Estée Lauder edges out Colgate to rank second in US top 10 beauty and personal care companies

Many personal care items are necessary, not discretional buys, which is why the big multinationals dominate the rankings of the top 10 beauty and personal care companies in the US. So it was a real upset when a pure-play prestige company like Estée Lauder nudged longtime number two Colgate-Palmolive into third place.

Expanding the annual list, compiled by the Household and Personal Products Industry, power performers among the top 50 US companies include: Revlon (14th; US$2.5 billion), Rodan + Fields (17th; US$1.5 billion), Kylie Cosmetics (32nd; US$420 million), The Honest Company (41st; US$315 million, KKW Beauty (49th; US$107 million) and Glossier (50th; US$102 million).

  1. 1. Procter & Gamble - US$41.3 billion
  2. 2. Estée Lauder - US$13.6 billion
  3. 3. Colgate-Palmolive - US$13.1 billion
  4. 4. SC Johnson - US$10.3 billion
  5. 5. Coty - US$9.3 billion
  6. 6. Johnson & Johnson - US$7.7 billion
  7. 7. Ecolab - US$5.1 billion
  8. 8. L Brands (Bath & Bodyworks, Victoria's Secret) - US$5 billion
  9. 9. Mary Kay - US$3.6 billion
  10. 10. Amway - US$2.9 billion

Global halal cosmetics market to reach US$52 billion

Austrade, the Federal government's trade investment and education promotion agency, held a webinar last year to discuss the huge potential of Indonesia, Malaysia and Vietnam as fast-growing markets for Australian cosmetic products.

Indonesia has the world's largest Muslim population and the cosmetics sector is soaring at the rate of 10 to 15 per cent a year. Imported cosmetics sales are close to US$500 million and there is a strong demand for natural and organic beauty. Euromonitor predicts that Indonesia will become one of the two fastest-growing beauty markets in Asia.

Over 60 per cent of the Malaysian population are also Muslim and, like Indonesia, incomes are rising rapidly and Internet penetration is high. According to a new report from Research and Markets, the world's largest market research resource, the global market for halal cosmetics will reach US$52 billion by 2025. Indonesia, Malaysia and other Asian countries are the largest regional market. The Middle East and Africa are the second largest regional market for halal beauty and accounted for 18 per cent of global sales in 2018.

Indonesia is also poised to become one of the 10 largest national beauty markets in the world within the next few years. More than half of women in Indonesia express a preference for halal cosmetics and the Indonesian government has implemented regulations that make halal certification mandatory for locally produced and imported beauty and cosmetic products. Skincare is the fastest-growing sector of the halal beauty market and, as Austrade noted, our largest neighbour to the north represents an amazing growth opportunity for Australian beauty brands.

Snippets from the Wires

  • With an increasing number of Australian colour cosmetic companies exporting to Europe, TechSci Research reports that the European lipstick market is expected to total US$2.4 billion by 2023. The top five markets for lippies in descending order are: the UK, Italy, Germany, France and Spain. As in Australia, there is increased demand for natural lip products says the researcher.
  • Many fashion and lifestyle brands diversify into fragrance, but there's not much movement the other way. Byredo, the niche fragrance brand stocked by Mecca, launched its first sneaker at Paris Fashion Week Men's SS20 recently.
  • Chanel enjoyed spectacular growth in the Asia/Pacific region last year. The French fashion house wants more and will open a flagship store on Alibaba's Tmall in the northern hemisphere autumn. A pre-sale trial last week offered cosmetics, skincare and fragrances through a third-party online operator in China. A first for Chanel.